Altcoins vs Bitcoin Explained

Bitcoin may be the most well-known cryptocurrency with its developed infrastructure and growing fan base. But there are over 500 other cryptocurrencies out there and, although many fade out after a short time in circulation, some are considered potential challengers to Bitcoin’s reign.

Known as “Altcoins“, these alternatives to Bitcoin each have their own individual characteristics and algorithms. Darkcoin, now known as Dash, was created as a fully anonymous version of Bitcoin. Not all are serious projects – Dogecoin was launched in honour of a canine internet meme.

But for some commentators, Altcoins play a vital role in the cryptocurrency world, encouraging further decentralisation, innovation and competition. Cryptocity looks at some of the most popular.

1. Ripple

What is Ripple?

Ripple, or XRP, is the second-largest digital currency by market capitalisation (see exhibit 1) – but it is also the name of the open payment network used to transfer the currency. Ripple labs built its protocol and currency as an alternative to the modern banking system: free of delays, extra fees and human error.

On the company website, Ripple Labs explains its philosophy:

Ripple seeks to expand on what Bitcoin started. More than just a digital currency, Ripple is the world’s first open transaction network. It serves as a decentralized, shared record of accounts and transactions of any kind. By creating this global ledger, Ripple does for money what the Internet did for all other forms of information.

Why Ripple over Bitcoin?

In many ways, Ripple as a currency is extremely similar to Bitcoin: a decentralised, maths-based currency with a finite number of units. It does not strive to be Bitcoin’s replacement however, but an enabler for a person with any currency (including Bitcoin) to access other currencies. In this way, its ambitions are global:

With Ripple, the history of money comes full circle. Once again, money can serve its primary purpose—to track value across a network—but, for the first time, that network can be the entire world.

Ripple is not mined in the same way as Bitcoins. Instead, it is created using a method called consensus, which requires “comparatively negligible computing power”.

How many Ripples?

100 billion XRP are expected to be created, but they are far cheaper than Bitcoins (see exhibit 2) at 135 for $1.

Exhibit 1 (Values in March 2015)

Ripple is the second-largest cryptocurrency by market cap after Bitcoin
Ripple is the second-largest cryptocurrency by market cap after Bitcoin

2. Litecoin

What is Litecoin?

One of the first Altcoins to emerge, Litecoin uses a different hashing algorithm to Bitcoin and an individual unit is worth less (see exhibit 2), which has proved popular. It was created in 2011, two years after Bitcoin, by former Google employee Charlie Lee as a more accessible version of Bitcoin.

“Silver to Bitcoin’s gold”

Where only 21 million Bitcoin will be created, 84 billion Litecoin are set to be made, making it “more abundant and more lightweight“. Litecoin transactions are also faster than Bitcoin ones.

But Litecoin is prone to alarming price swings that have caused enthusiasts to be wary. Jumping by 400% in just one week in late November 2013, Litecoin’s value peaked at over $40 but has slowly slumped since, currently hovering around the 1.4$ mark.

Exhibit 2 (Values in March 2015)

Altcoin price comparison chart
Altcoin price comparison: Ripple, Bitshares and Dogecoin barely visible

3. BitShares

More bits?

BitShares is a peer-to-peer trading platform that uses a currency known as BitAssets. With BitShares, a company can forgo the typical Wall Street IPO and instead issue shares in the form of digital tokens. These cryptotokens – which come in different currencies such as BitUSD and BitEuro – can then be traded on the BitShares platform.

Their website explains:

“For traders, BitAssets are providing the opportunity to trade in the value of their favorite currency or commodity without leaving the privacy and convenience of the blockchain. And for all users, bitAssets pay a daily interest rate that rivals or surpasses most savings banks.”

Exhibit 3 (Values in March 2015)

Volume of Altcoin Transactions over 24 hours
Volume of Altcoin Transactions over 24 hours

0 Comments

·

Leave a Reply

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s